Mini Budget 2022 – Key Announcements For Individuals

Income Tax

The Chancellor Kwasi Kwarteng has brought forward the cut to basic rate tax one year earlier which will see basic rate tax go from 20% to 19% from April 2023.  This will be the first cut in income tax for 16 years.  Kwarteng said “This means that we will have one of the most competitive and progressive income tax systems in the world,”

In a surprise move he has abolished the additional rate of income tax. The 45% rate for earnings over £150,000 will be abolished altogether. He says “Labour never had a 45% rate of income tax when it was in power”

Investments

From April next year, the amount companies can raise through SEIS will rise from £150,000 to £250,000, and the annual investor limit will double to £200,000. The gross asset limit will rise to £350,000, and the age limit extended from two to three years. The Treasury also announced that it will increase the availability and generosity of the seed enterprise investment scheme. But a clause created as part of European Union state aid rules means VCT relief is only available to subscribers in the VCT for shares issued before April 6, 2025. VCT’s offer a 30% tax relief on investments if the investments are held for five years and dividends received on VCT shares are tax free but VCTs invest in higher risk unquoted companies.

The Chancellor said “The government remains supportive of EIS and VCTs and sees the value of extending them in the future,”

Dividend Tax

The government has scrapped the planned increase in dividend tax rates and the dividend tax cut will come into effect from April 2023 and see the rates drop back to those previously and is expected to save dividend taxpayers an average of £345 next year.

The Treasury said about the dividend tax cut “signals renewed support for entrepreneurs and investors as part of the government’s drive to grow the economy and improve the standard of life for families across the UK”.

National Insurance

The Chancellor Kwasi Kwarteng has reversed the national insurance rise; which will take effect from 1st November.  National Insurance contributions were increased to 13.25% from April 2022 with the additional 1.25% to go to the NHS but the Chancellor has reversed this decision in today’s budget. It is calculated that Britain’s poorest 3m households will be as little as 63p a month better off.

The planned health & social care levy which was due to come into effect from April 2023 has also been cancelled. The question now will be how will these services be funded.

Read more about our services for individuals here. More info can be found on the HMRC website.